After admitting it had altered software to misreport the emissions of its diesel cars, Volkswagen is allocating some serious money to help it save face.

In its statement, VW said the software was installed in other VW diesels, but only affected the pollution levels in its 2-liter turbodiesel motor, which was sold in Beetles, Jettas, Passats, Golfs and the Audi A3 in this country.

Volkswagen has revealed that 11 million diesel cars worldwide are equipped with devices that can cheat pollution tests, a dramatic expansion of a scandal that immediately sent its shares plummeting by another 20 per cent. The controls are switched off when driving normally, releasing pollutants.

The EPA said that when it confronted Volkswagen with the results of its tests, the company admitted that the test-evading software was on the cars. “I personally am deeply sorry that we have broken the trust of our customers and the public”, he said.

In theory, American authorities could hit Volkswagen with a fine of $18 billion, although that is likely to be reduced due to co-operation and actions to fix the problem.

Volkswagen said it would set aside 6.5 billion euro in its third quarter to address the matter and warned that the number could change.

The company hasn’t contested the accusation, and Chief Executive Martin Winterkorn has since issued a personal apology.

Investigations across the pond are widening, with the United States government and European Commission both involved, and now the Transport & Environment group say: “There is strong evidence that similar illegal devices are also used in Europe by both VW and other manufacturers”. German Chancellor Angela Merkel also called on Volkswagen to be transparent and act quickly to address worldwide regulators’ concerns.

“We do not and will not tolerate violations of any kind of our internal rules or of the law”. It is and remains the top priority of the Board of Management to win back lost trust and to avert damage to our customers.

Authorities in Asia have said they will investigate the world’s biggest-selling carmaker Volkswagen after it failed emissions compliance in the U.S. , leading to 500,000 cars to be recalled and shares to tumble. “You will understand that we are anxious that the justifiably excellent reputation of the German vehicle industry and in particular that of Volkswagen suffers”, commented German Economy Minister Sigmar Gabriel.